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What Do You Understand by Positive Economic Analysis? Economics

By June 25, 2020February 7th, 2023No Comments

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  • Lionel Robbins defined economics as the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.
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  • Positive economic statements do not have to be correct, but they must be able to be tested and proved or disproved.
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Positive economics means more focus on data, facts, and figures rather than personal perspectives. The statements here are to the point and supported by relevant information. On the other hand, normative economics focuses more on personal perspectives and opinions rather than facts and figures.

To study the factors influencing the increase in government spending will reduce the unemployment rate. Positive economics relies on the facts and factual data. There are no assumptions made in positive economics. Positive economics can be tested and backed up by data. It is concerned with describing and explaining an economic process. As initially, the production in the economy is below its potential due to unemployment, this suggests that the economy is operating at a point below the Production Possibility curve .

Positive economics is the stream of economics that has an objective approach, relied on facts. It concentrates on the description, quantification, and clarification of economic developments, prospects, and allied matters. This subdivision of economics relies on objective data analysis and relevant facts and figures.


Macroeconomics is concerned with large-scale production factors or general economic factors. It studies the conduct and performance of the economy as a whole. These decision making units can be a single person, a household, an organization, or a government agency. In simple language, microeconomics deals with single factors and effects of individual decisions. Lionel Robbins defined economics as the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.

positive statement in economics

Different economists have defined economics in different words. Here are some famous definitions of the word economics. Unemployment is reduced due to the measures taken by the government.

The policies framed by keeping positive economics in mind doesn’t affect everyone in the same manner. Macroeconomics doesn’t take individual decisions into consideration. It emphases on the combined changes in the economy such as interest rates, unemployment, and growth rate. Positive economics can be verified, while normative economics can’t be verified and detected. It is impossible to create a stable market in case of normative economics.

Positive and Normative Economics: Definitions and Differences

It includes economic development, investment projects, statements, and scenarios. Single decision of positive economics has a different impact on everyone. For consideration, raising rates may be important for slow growth and is a boon for lenders. But at the same time, positive statement in economics it is no less than a curse to borrowers. Certain decisions of positive economics are based on emotions more than logic. The no space to value and judgments in positive economics, allows the policy makers to frame required measures to tackle any economic conditions.

Positive and Normative Economics is rightly known as the two arms of Economics. Positive economics deals with various economic phenomena, while normative economics focuses on what economics should be, this branch of economics talks about the value of the company’s fairness. In lucid language, positive economics answers the ‘what’ factor, whereas normative economics mandates the ‘should be’ or ‘ought to be’ section of economics. A clear understanding of the difference between positive and normative economics may lead to better policy-making if policies are made based on a balanced mix of facts and opinions .

positive statement in economics

It deals with the present economy, like whatever presently happening in the country is a part of positive economics. Contrarily, normative economics focuses on presenting statements that may or may not be possible in the future. Moreover, in some cases, such statements do not have any credible data to back them up. Positive economics is based on objective data, while normative economics is based on facts and logic. Positive economics provides a more scientific and calculated clarification on an economic issue.

What is Economics?

However, normative economics also provides such solutions but ones that are based on personal values. Normative economics deals with prospective or theoretical situations. This division of economics has a more subjective approach. It focuses on the ideological, perspective-based, opinion-oriented statements towards economic activities. The aim here is to summarise the desirability quotient among individuals and quote factors like ‘what can happen’ or ‘what ought to be’.

As the government starts employment generation schemes, the unemployed resources get utilized. In a situation of full employment the economy would move to a point on the PPC. Hence, economic value is reflected in terms of increased output and income.

positive statement in economics

The perspective of these two concepts is a significant point of difference between them. Positive economics is objective, whereas normative economics is subjective. The focus of positive economics is on presenting relevant and more focused statements backed by actual data.

Central problems of microeconomics is price determination and allocation of resources but that of macroeconomics is determination of level of income and employment. The positive economic analysis is the analysis of present economic position. An endogenous variable is a variable in a statistical model that’s changed or determined by its relationship with other variables within the model.

Normative economics statements are subjective and rely heavily on values originating from an individual opinion. These statements are often very rigid and perceptive. Therefore, they are considered political or authoritarian. Microeconomics analyses how equilibrium of a consumer, a producer or an industry is attained but macroeconomics is concerned with determination of economy’s equilibrium level of income, employment and output. In the philosophical literature, the logical basis of such a relationship as dichotomy has been disputed. These controversies are reflected in the discussion of positive science in economics, where opponents are Gunnar Myrdal and a group of feminist Economic advocates.

Positive VS noemative economics

Positive economics is sometimes described as “what is” economics. In contrast, normative economics discusses “what should be”. The distinction was laid out by John Neville Keynes and was elaborated by Milton Friedman in an influential essay in 1953.

Disagreements over public policies typically revolve around normative economic statements, and the disagreements persist because neither side can prove that it is correct or that its opponent is incorrect. A clear understanding of the difference between positive and normative economics should lead to better policy making, if policies are made based on facts , not opinions . Nonetheless, numerous policies on issues ranging from international trade to welfare are at least partially based on normative economics.

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